For decades the principle “you cannot contract around bankruptcy” has been a widely accepted reality, even when scholars have argued against the same. However, with the budding body of law foreclosing relief from bankruptcy courts to marijuana and marijuana adjacent companies, a potential growth opportunity for bankruptcy contracting may appear through the haze. In his article Up in Smoke: Bankruptcy by Contract in the Legal Cannabis Industry, Professor William A. Organek (Zicklin School of Business, Baruch College, City University of New York) rolls up his analysis of almost 75,000 pages of publicly-filed documents from marijuana related companies to examine whether such companies include contract terms to replace or stand-in for unavailable bankruptcy relief. Professor Organek’s analysis shows that even though budding companies may run out of green and into financial trouble, the examined contracts indicate that few are having blunt discussions with creditors and largely letting the opportunity to contract around bankruptcy go up in smoke. The article suggests that high transaction costs may explain why bankruptcy contracting is rare and offers pot-ential suggestions for improving outcomes when the buzz wears off for cannabis companies.

To read the article, click here.

Video Preview